The new statutory Child Maintenance Service Our reforms put collaboration between parents in the interests of their
Within the new Child Maintenance Service there will be three progressive layers designed to support and promote collaboration:
Application; followed by
a calculation of maintenance, with payment made directly between parents (‘Direct Pay’); and
payment collected and enforced where payment is not made directly between parents.
There will be application and collection fees attached to the new statutory service so as to give both parents a real and ongoing financial incentive to overcome their differences and collaborate in the interests of their children.
The application fee is designed to act as an incentive for both parents to collaborate and remain outside of the statutory service.
The Direct Pay option will provide a way for parents to access the statutory service in a way that can help rebuild trust between them and thus avoid the collection fees for the use of the collection service.
Where the Child Maintenance Service collects maintenance, a collection fee will be levied on both parties. This will create a powerful incentive for parents to provide support for their children in full and on time through the Direct Pay option.
The introduction of penalty charges on the non-resident parent for enforcement action will act as a further incentive for the non-resident parent to comply.
The Child Maintenance Service will be opened to a pathfinder group of new applicants from October 2012 and then extended over time to cover all new applicants seeking a statutory arrangement. Charging will be introduced after the Child Maintenance Service has been opened to all new applicants and is working well.
The remainder of this section outlines the client experience from the time that charging is introduced, although the new calculation methodology and links to HM Revenue & Customs will be introduced from October 2012.
At the point of making an application to the Child Maintenance Service, an application fee will be payable. We have designed this to make applicants consider whether a collaborative family-based arrangement with the other parent is possible, before entering into the statutory service.
At £20, the application fee is a small fraction of the average cost of
processing an application.
Upon receipt of the application fee, we will attempt to trace the non-resident parent. A maintenance liability, based in most cases on income information taken from HM Revenue & Customs, will be calculated and sent to the non-resident parent and the parent with care, both for information, and to enable them to check the figures for accuracy. This calculation can be appealed where appropriate. We will then provide them with a forward-looking payment schedule for the year.
As most income information will be imported direct from HM Revenue & Customs, rather than relying on non-resident parents to provide it, the clearance time of new applications compared to the current system will improve dramatically. Typically, where we have been able to obtain the information from HM Revenue & Customs we will aim to issue confirmed calculations and payment schedules within four weeks of application, compared to the current system where we clear 90 per cent of applications
in 12 weeks.
Using data from HM Revenue & Customs also means that we will be able, where applicable, to take into account a fuller range of taxable income in calculating the maintenance liability. Parents will be able to apply to have additional income, typically from properties, savings, and investments,
taken into account through a strengthened Variations scheme.
Additionally, by basing the maintenance calculation on the latest available tax year data, we will be able to provide a fairer but more rigorous service where the non-resident parent’s annual income fluctuates, for example the self-employed, seasonal workers or those who are in receipt of annual bonuses.
Once the current schemes are fully closed to new applications, we will then increase the new scheme flat rate for low-income non-resident parents from£5 to £10 per week. This rise in the flat rate will increase the amount of money flowing to children in cases with some of the lowest maintenance awards, and will reflect more closely the percentage level of maintenance that non-resident parents with weekly incomes of £200 or more are required to pay.
Annual schedules will mean that both parents know in advance how much
they will be paying and receiving over a set period, aiding financial stability
for both parties. Therefore, we will automatically reassess all cases and provide payment schedules on an annual basis, again using data automatically obtained from HM Revenue & Customs. No additional
fee will be payable for this ongoing service.
Where either parent requests an in-year change to the maintenance calculation, there will be an income threshold for changes of 25 per cent.
This threshold ensures that maintenance liabilities are not disrupted
in-year by numerous small changes to the non-resident parent’s financial circumstances, but does take into account significant changes in circumstances, such as the non-resident parent becoming unemployed or entering employment. This will result in a fair and transparent maintenance liability, which the non-resident parent has the ability to pay.
We believe that is it important that we give all non-resident parents the opportunity to demonstrate that, given the right incentives, they can take responsibility, collaborate with the other parent in the interests of their
children, and pay maintenance directly to the parent with care.
Consequently, we will offer the option of Direct Pay to most non-resident parents unless there is good reason to doubt whether the non-resident parent will pay. Unlike at present, the parent with care will not be able to veto the right of the non-resident parent to opt to pay through Direct Pay. This will tend to limit the ability of one parent to use the collection service as a means of control or revenge against the other.
Direct Pay, previously known as ‘Maintenance Direct’, is where payment
is made direct from one parent to the other. This could be via a number of methods including (but not limited to) direct debit or standing order.
If either party wishes to pay by Direct Pay while protecting their personal details, for example in the case of domestic violence, then we will refer them to a money transfer service that will transfer payments between parties without the need to make any contact or to divulge any personal information.
Where the parent with care informs us that the non-resident parent has
failed to pay in full and on time, we will seek to contact the non-resident parent by telephone within 72 hours, and it will then be for them to provide evidence that they have made payment.
The non-resident parent will have 14 days to provide evidence that the allegedly missed payments had indeed been made and, if they are unable
to do so, we will move them rapidly into the collection service where fees will apply accordingly and we will be able to use a range of enforcement actions to secure maintenance payments from the non-resident parent on behalf of the parent with care.
Providing the non-resident parent pays the parent with care in full and on
time, there is no reason why either party should ever need to pay any further charges or fees.
While there will always be some cases where a collection service will be needed, forcibly removing money from one parent to give it to another is inefficient in most cases. It also does little to improve relations between them and makes collaboration less likely in future. That is why we will introduce fees for using the collection service: to incentivise both parents to use Direct Pay, where there will be no collection fees.
Once a case has been moved into the collection service, we will add a
20 per cent fee to the non-resident parent’s liability and deduct seven per cent from the parent with care’s maintenance payment for providing this service.
We have set the collection fee on the non-resident parent at a level to create a strong incentive for them to make payments to the parent with care through Direct Pay in full and on time.
The collection fee, once introduced, will apply equally to non-resident parents who are in work, and non-resident parents who are on benefits, and the fee applies on top of the flat rate. For example, if a non-resident parent on benefit was paying the flat rate maintenance liability of £10, we would collect a total of £12.
If, having been brought into the collection service, the non-resident parent wishes to have a second chance at paying through Direct Pay, the Child Maintenance Service must be satisfied that the non-resident parent is not ‘unlikely to pay’. Typically, this will require the parent with care to agree with the move back to Direct Pay, and the parent with care collection charge creates the incentive for this to happen where the non-resident parent’s behaviour has clearly changed. It is, however, obviously preferable for all parties to avoid the collection service entirely, rather than to move into it and then seek to return to paying maintenance through Direct Pay. In the case of domestic violence CMEC would broker this agreement and absolutely no contact will be required between the two parties.
At seven per cent the parent with care fee is much lower than the non-resident parent fee because, while it is vital that the parent with care has an incentive to allow the non-resident parent to pay maintenance through Direct Pay, it is in the hands of the non-resident parent, through their conduct, whether maintenance is paid through Direct Pay or through the collection service. The proposed parent with care fee is at the very bottom of the range set out in the Strengthening Families Green Paper. This is because the Government has listened carefully to the concerns of stakeholders and parliamentarians.
In the current system much time and effort is expended chasing missed payments. Too many non-resident parents simply wait for the system to catch up with them.
Taking enforcement action is expensive and this expense is currently met by the taxpayer. Given that enforcement action is only taken where we believe the non-resident parent has chosen to avoid payment, it is only right that the non-resident parent contributes to these costs.
We want enforcement charges to influence non-resident parents’ behaviour and provide an incentive for them to pay maintenance in full and on time, thereby avoiding enforcement charges altogether. While we considered setting charges in line with the costs of taking enforcement action, we ruled this out in favour of increasing the charges in line with the severity of the enforcement action taken.
Our own research indicates that we can most likely influence non-resident parents by charges at the early stages of the enforcement process, where debt is generally lower, and behaviour is less entrenched. This is why we are only applying charges to the actions listed in Table 2. The Commission will continue to apply to the courts to recover certain costs associated with court actions that do not carry enforcement charges, such as Orders for Sale. These are set out in the Collection and Enforcement Regulations 1992 and continue to apply.
We are actively seeking views on the detail of how charging should operate in practice, particularly around the operation of the domestic violence exemption and our approach to enforcement charging. We strongly encourage interested parties to submit their views on this.
However, we are not consulting on the principle of charging itself as this has already been consulted on extensively.